With COVID-19 wreaking havoc on the economy, many seniors and those nearing retirement are contemplating the pandemic’s impact on their Social Security benefits. Millions of Americans have become unemployed or saw a reduction in wages. According to the Center for American Progress, more than four million Americans will see a negative impact on their Social Security benefits. The current situation only compounds the lack of knowledge among seniors on how the Social Security system works. According to a SimplyWise survey, less than one in eight Americans aged 60-70 saw themselves as “very knowledgeable” on the subject1 . To make matters worse, the vast amount of conflicting information from so-called experts only exacerbates the uncertainty many are experiencing.
On Shaky Ground
In April, the Social Security Board of Trustees released its annual report on the long-term financial status of the Social Security Trust Funds2 . The combined asset reserves of the Old-Age and Survivors Insurance and Disability Insurance (OASI and DI) Trust Funds are projected to become depleted in 2035, the same timeframe as projected in last year’s report. At that time, the overall system will only be able to pay 79% of benefits. Just the OASI Trust Fund (excluding the Disability Trust Fund), which is responsible for the retiree benefit, is projected to be depleted in 2034, at which time the system will only be able to support 76% of benefits payable. In other words, unless something changes, those receiving benefits will experience a 24% decrease in monthly payments. The total annual cost of the program is projected to exceed total income, for the first time since 1982, in 2021 and remain higher throughout the 75-year projection period. The Trustee’s Report was released in April and does NOT take into consideration any COVID-19 effects. Even before the pandemic, not all Americans were confident Social Security would be there for them when they get older, even though they’ve paid into the system throughout their careers. According to the NationWide Retirement Institute, two-thirds of baby boomers believed Social Security would run out in their lifetime. To make matters worse, one fifth said they had no source of retirement income outside of Social Security.
[read the full pdf report below]